Richmond-based Xenith Bank on Wednesday announced a deal to acquire the local operations of Paragon Commercial Bank, a $1.1 billion Raleigh-based institution.
Xenith will close Paragon’s Henrico office and is still working out which staff will come onboard.
As part of the deal, Xenith acquired $60 million in loans from Paragon and assumed $71 million in deposits.
Xenith will get primarily commercial and industrial loans, owner-occupied real estate and commercial real estate loans. It had the ability to pick the loans that it wanted from Paragon’s books.
“The loans that we have purchased are all performing loans and, we believe, good loans,” said Gaylon Layfield, Xenith’s CEO.
The deal comes barely two months after Xenith successfully raised almost $20 million in a stock offering. It will be a substantial boost to Xenith’s asset base, which currently stands at $264 million, including $108 million in deposits and $172 million in loans.
Layfield said Paragon initiated the deal.
“We were approached to see whether or not we had an interest,” Layfield said. “We determined indeed we did have an interest and took it from there.”
“We’ve been in the process of talking with them for a number of weeks,” Layfield said. “It has come to fruition fairly quickly.”
Paragon opened its Richmond office in 2006. That was its first outside of North Carolina. The bank made its mark in the market, building up its local deposit base to almost $100 million as of June 2010.
But Paragon got caught in the fallout of some troubled local developers, including Hank Wilton and Justin French. It also lent to Prospect Homes, a large homebuilder that went bust in 2009, and Tomac Homes, which was sued by several local lenders last year for defaulting on loans.
It also was one of several banks that got caught up in the bankruptcy of the Federal Club, a golf course in Hanover County.
Paragon lost $1.2 million in the first quarter, according to its FDIC reports. It had $46.8 million in past due and non-accrual loans at the end of the first quarter. That’s up more than $13 million since the end of the year.
The bank lost $7.1 million in 2010.
Xenith and its holding company, Xenith Bankshares, were created in late 2009 after they acquired Hampton Roads-based First Bankshares and its subsidiary SuffolkFirst Bank.
Xenith, which has 87 employees, was founded to be a bank built from scratch, but it took the route of acquiring SuffolkFirst for its charter after the market turned.
Upon announcing the deal, Paragon said the move would allow it focus on its core North Carolina markets in Raleigh and Charlotte.
“The federal authorities have been calling for a return of bank lending to local markets, and this move will facilitate Paragon’s ability to increase lending efforts,” Paragon said in its release.
As for Paragon’s 10 local employees, Layfield said the banks are still working out how many will make the jump.
“We are working through all those details,” he said. “They have a great team here in Richmond, and we absolutely intend to keep a substantial part, if not all of their group.”
Paragon is led locally by Mike Keck, who did not return messages by press time. A media representative for Paragon in North Carolina said the bank’s executives were not available to comment.
Xenith does have plans to close Paragon’s local office, located off Glenside Drive, and consolidate it into Xenith’s downtown headquarters.
The specific financial details of the deal aren’t easy to calculate. Xenith will pay 96.23 percent for $61 million on loans from Paragon. Xenith will then assume the $71 million in deposits, which are technically liabilities, and will pay Paragon a $2.7 million premium.
In the end, Paragon will pay Xenith about $10 million, a number that will fluctuate between now and the time of closing, for assuming more deposits than loans.
A big part of the deal, Layfield said, was examining which of Paragon’s loans Xenith wanted to buy to make sure they were healthy.
“One of the very distinct challenges in the market today, any time you’re considering an acquisition of loan assets, is to be sure you really understand what you’re buying.”
And Xenith might soon have more deals up its sleeve.
“We will fundamentally grow through organic growth, but we are certainly interested in opportunities like this, and we’re delighted when they come along,” Layfield said.
The transaction is expected to close in the third quarter, pending regulatory approval and other closing conditions.
Michael Schwartz is a BizSense reporter and covers banking. Please send news tips to [email protected].
Richmond-based Xenith Bank on Wednesday announced a deal to acquire the local operations of Paragon Commercial Bank, a $1.1 billion Raleigh-based institution.
Xenith will close Paragon’s Henrico office and is still working out which staff will come onboard.
As part of the deal, Xenith acquired $60 million in loans from Paragon and assumed $71 million in deposits.
Xenith will get primarily commercial and industrial loans, owner-occupied real estate and commercial real estate loans. It had the ability to pick the loans that it wanted from Paragon’s books.
“The loans that we have purchased are all performing loans and, we believe, good loans,” said Gaylon Layfield, Xenith’s CEO.
The deal comes barely two months after Xenith successfully raised almost $20 million in a stock offering. It will be a substantial boost to Xenith’s asset base, which currently stands at $264 million, including $108 million in deposits and $172 million in loans.
Layfield said Paragon initiated the deal.
“We were approached to see whether or not we had an interest,” Layfield said. “We determined indeed we did have an interest and took it from there.”
“We’ve been in the process of talking with them for a number of weeks,” Layfield said. “It has come to fruition fairly quickly.”
Paragon opened its Richmond office in 2006. That was its first outside of North Carolina. The bank made its mark in the market, building up its local deposit base to almost $100 million as of June 2010.
But Paragon got caught in the fallout of some troubled local developers, including Hank Wilton and Justin French. It also lent to Prospect Homes, a large homebuilder that went bust in 2009, and Tomac Homes, which was sued by several local lenders last year for defaulting on loans.
It also was one of several banks that got caught up in the bankruptcy of the Federal Club, a golf course in Hanover County.
Paragon lost $1.2 million in the first quarter, according to its FDIC reports. It had $46.8 million in past due and non-accrual loans at the end of the first quarter. That’s up more than $13 million since the end of the year.
The bank lost $7.1 million in 2010.
Xenith and its holding company, Xenith Bankshares, were created in late 2009 after they acquired Hampton Roads-based First Bankshares and its subsidiary SuffolkFirst Bank.
Xenith, which has 87 employees, was founded to be a bank built from scratch, but it took the route of acquiring SuffolkFirst for its charter after the market turned.
Upon announcing the deal, Paragon said the move would allow it focus on its core North Carolina markets in Raleigh and Charlotte.
“The federal authorities have been calling for a return of bank lending to local markets, and this move will facilitate Paragon’s ability to increase lending efforts,” Paragon said in its release.
As for Paragon’s 10 local employees, Layfield said the banks are still working out how many will make the jump.
“We are working through all those details,” he said. “They have a great team here in Richmond, and we absolutely intend to keep a substantial part, if not all of their group.”
Paragon is led locally by Mike Keck, who did not return messages by press time. A media representative for Paragon in North Carolina said the bank’s executives were not available to comment.
Xenith does have plans to close Paragon’s local office, located off Glenside Drive, and consolidate it into Xenith’s downtown headquarters.
The specific financial details of the deal aren’t easy to calculate. Xenith will pay 96.23 percent for $61 million on loans from Paragon. Xenith will then assume the $71 million in deposits, which are technically liabilities, and will pay Paragon a $2.7 million premium.
In the end, Paragon will pay Xenith about $10 million, a number that will fluctuate between now and the time of closing, for assuming more deposits than loans.
A big part of the deal, Layfield said, was examining which of Paragon’s loans Xenith wanted to buy to make sure they were healthy.
“One of the very distinct challenges in the market today, any time you’re considering an acquisition of loan assets, is to be sure you really understand what you’re buying.”
And Xenith might soon have more deals up its sleeve.
“We will fundamentally grow through organic growth, but we are certainly interested in opportunities like this, and we’re delighted when they come along,” Layfield said.
The transaction is expected to close in the third quarter, pending regulatory approval and other closing conditions.
Michael Schwartz is a BizSense reporter and covers banking. Please send news tips to [email protected].